Banking Unit

An Offshore Banking Unit (now known as an International Banking Unit - IBU) is a Cypriot limited liability company, or a branch of a foreign bank, which has obtained a banking license from the Central Bank. In Cyprus, non-Cypriot banks are offered the status of IBU, being restricted to banking operations with non-residents in foreign currencies, and with Cyprus-registered non-resident companies and their expatriate staff. The Central Bank issues IBU licenses and normally requires fully-staffed operation. If the IBU is controlled from abroad, and there is no local permanent establishment, there will be no profits tax.

The following forms are permitted:

• Branches of foreign banks The Central Bank favours this arrangement; there are no liquidity or risk ratio requirements, and there is no reserve requirement. The annual supervision fee is $15,000.
• Subsidiaries of foreign banks These are supervised more closely, and liquidity and risk ratios may be imposed. The annual supervision fee is $15,000.
• Representative Offices Representative Offices may be formed under the Companies Law, but may not conduct banking business except with clients of their parent bank; the annual supervisory fee is $5,000.

  Administrative Banking Units (ABUs)

  These units carry out their banking business through local Cyprus banks but are otherwise similar to branches or subsidiaries. The annual supervisory fee is $10,000.

  In addition to the Central Bank, the Cypriot banking system consists of 9 local commercial banks, 30 IBUs, 2 administered banking units, 3 specialised financial institutions and a number of leasing companies. Commercial banking arrangements and practices follow the British model.